Apple pay was released to the public just over a week ago and it's stumbling out of the gate. Reports of technical issues like double charging are spreading, and retailer participation is low. If you're lucky enough to have found a place to use your iPhone 6 for payment, chances are you were pretty impressed with the process. Unfortunately the payment system may be doomed to fail.
By all accounts, Apple has created the smoothest, most technically advanced payment solution yet. Working closely with VISA, Apple has solved many complex security issues making in person payments safer than ever while simultaneously making mobile payments easier than ever. No small feat.
Lurking in the shadows however is a competing solution called CurrentC which has recently gained a lot of press as backers of the project moved to block NFC payments (Apple Pay, Google Wallet, etc.) at their retail terminals. The strength of the merchants designing or backing CurrentC is enormous. It reads like a greatest hits list of retail outfits and leading the way is the biggest of them all, Walmart. The retailers have joined together to create a platform that is independent of the credit card companies and their profit-robbing transaction fees. Hooking directly to your bank account rather than a credit or debit card, CurrentC will use good old ACH to transfer money from your account to the merchant's bank account at little to no cost (fees can vary but are generally flat-rate pennies rather than a percentage of the transaction).
This is huge for the merchants who are losing a significant amount of money on every credit card transaction. The biggest players like Walmart, Target, Exxon, CVS, Lowes, RiteAid, Kmart etc. (all backers) operate on huge volume at low margins which makes the fees crippling to their profits. If you don't think that credit card processing fees can have that much of an impact, read the first section of this post. Walmart for instance has a profit margin or 3% - 3.5%, imagine what saving 2% on credit card fees would mean to their bottom line.
So what do these retailers do? They band together and create their own payment system, CurrentC, and box out the competitors by disabling NFC on their terminals. This is a major move by a group of major merchants controlling over 110,000 retail locations. Their system is largely driven by QR codes which makes it prehistoric in comparison (people scanning QR codes) but has the benefit of working on the broadest range of devices. Like Apple Pay, the actual transaction is handled securely without the merchant needing to have access to your personal account information. Unlike Apple Pay, the process is described as clunky and cumbersome.
What it boils down to is the fact that one technology is designed for the users (Apple) and the other is designed for the merchants (CurrentC). Normally I'd say that the product with the most user appeal will win but the power and size behind the CurrentC group is too big to ignore. People aren't reliant on mobile payments at this point so stopping Apple Pay out of the gate is a strong move as almost nobody will miss it.
At the same time, the CurrentC backers can roll out proprietary incentives through their platform that a shopper can only take advantage of by paying with CurrentC. If you frequent a store that is pushing CurrentC, you're not likely to hold out for long, especially if that store is your normal grocery store where shopper club discounts are significant (current supporters include Giant Eagle, Publix, Shop Rite, Acme, Meijer, Price Rite, and Sams Club).
So not only will some of the most popular stores on the planet corral you in with CurrentC based discounts and offers, they will actively block you from using anything else. The amount of money the merchants will save in processing fees is so large that they may even pass on a percentage of savings to the customer for helping them avoid the fees.
Apple Pay has the better technology but they lack the retail support to dominate. If you can't use Apple Pay almost everywhere, it's doomed. Some say that consumers will look to change where they shop based on their support of mobile payments but I have a hard time believing that. If anyone can pull this upset off it's Apple, but it will need the surrender of the largest retailers in the world who are fighting tooth and nail against credit card fees.